1. When is the use of a fixed-term contract appropriate?
2. What considerations need to be made when renewing a fixed-term contract?
3. When can a fixed-term contract be deemed to be a contract of indefinite duration?
4. What are the objective justifications for not offering a contract of indefinite duration?
5. Can an employee bring an unfair dismissal claim on the non-renewal of a fixed-term contract? 
6. What protections are afforded to fixed-term workers?
7. Is there a restriction on the length of a fixed-term contract?
8. Can you dismiss an employee prior to the expiry of the fixed-term?
9. Are employees entitled to redundancy if/when they are dismissed at the end of the contract?

Q. When is the use of a fixed-term contract appropriate?

Fixed-term or specific purpose contracts are designed to cover a temporary situation and short-term demands, whether defined by a period of time or a precise need (for example maternity leave cover or a particular project). Fixed-term contracts terminate when an "objective condition" is met, such as the arrival of a specific date, the completion of a specific task or the occurrence of a specific event. They are not intended to be permanent contracts of employment.

The regular renewal of fixed-term contracts is not an appropriate means to meet stable and ongoing business demands, not least because the law makes it difficult to renew without the risk of the fixed-term contract morphing into a permanent contract. Permanent contracts are viewed by the state as the default and superior employment contract so Ireland's laws are aimed at promoting the use of permanent contracts and preventing the roll-over of more precarious fixed-term contracts.

Q. What considerations need to be made when renewing a fixed-term contract?

Where an employer wants to renew a fixed-term contract, the fixed-term employee must be provided with a written statement outlining the objective grounds justifying the renewal. This statement must also set out the reasons why the employer is not offering the employee a permanent contract of employment. This statement must be provided to the employee prior to the expiry of the fixed-term contract and at the latest, by the date of the renewal. This requirement for notice in writing is mandatory.

Q. When can a fixed-term contract be deemed to be a contract of indefinite duration?

Where a fixed-term employee is employed on two or more continuous fixed-term contracts and the total duration of those contracts exceeds four years, the contract between the parties is deemed to be one of indefinite duration (i.e. a permanent contract) – unless the employer has an objective justification for renewing the fixed-term contract. Generally speaking, short gaps between successive fixed-term contracts cannot be used to avoid this rule.

Q. What are the objective justifications for not offering a contract of indefinite duration?

Objective justifications for not offering a contract of indefinite duration must be based on considerations other than the status of an employee as a fixed-term employee. Examples of objective grounds that have been relied upon by employers in justifying the renewal of fixed-term contracts include:

• where an employer is facing significant restructuring, including redundancies in order to maintain economic viability
• the need for temporary expertise in a particular field
• to provide workers for a short-term project, provided the project is clearly defined and will eventually come to an end
• to cover staff absence including secondment, maternity, parental, adoptive or sick leave, provided the work done by the fixed-term employee has a clear relationship to the work carried out by the staff member being covered.

An "objective justification" for the renewal of a fixed-term contract must:

• correspond to a real need and legitimate objective of the employer
• be appropriate and necessary to achieve this objective

Q. How can an employer prevent an employee taking a claim under the Unfair Dismissals Acts (the UD Acts) on the expiry or non-renewal of a fixed-term contract?

The use of fixed-term contracts is designed to provide employers some flexibility with their workforce without the rigorous application of the UD Acts on the termination of such contracts.

Generally, once an employee on a fixed-term contract reaches 12 months' service, he/she will be in a position to take a claim of unfair dismissal. However, where the following requirements are met, the employee cannot take a claim for unfair dismissal just because the fixed-term contract has expired or has not been renewed:

(i) the contract is in writing

(ii) the contract was signed by both parties

(iii) the contract expressly excludes the application of the UD Acts on expiry of the term

This exclusion of the UD Acts is only available when the fixed-term contract expires or is not renewed. If the employer dismisses the fixed-term employee during the term of the fixed-term contract, and the employee had 12 months' service, he/she would be entitled to bring a UD claim.

Q. What protections are afforded to fixed-term workers?

The Protection of Employees (Fixed-Term Work) Act 2003 (the 2003 Act) regulates the use of fixed-term contracts and provides significant protection for fixed-term employees.

Under the 2003 Act, a fixed-term employee must not be treated less favourably in respect of his/her terms and conditions of employment than a comparable permanent employee. A "comparable permanent employee" may be another employee of the same employer or an employee in the same industry/sector as the fixed-term employee.

Less favourable treatment may be permitted if such treatment can be justified on objective grounds i.e. if taken as a whole, the terms of the fixed-term employee’s contract are as favourable as the terms of the comparable permanent employee’s contract of employment.

Q. Is there a restriction on the length of a fixed-term contract?

No. The 2003 Act does not restrict the length of a fixed-term contract so the initial fixed-term can be for as long or short as required.

Q. Can you dismiss an employee prior to the expiry of the fixed-term?

Yes, but if employers terminate prior to the expiry of a fixed-term the UD Acts will apply to that termination whether or not the "opt out" (explained at Q5 above) is included in the contract. In Ireland all dismissals are automatically considered to be unfair unless the employer can prove otherwise. A dismissal may be "fair" if the termination results from:

• The capability, competence or qualifications of the employee
• The conduct of the employee
• The employee being made redundant
• Some other substantial ground justifying the termination

If no such substantial grounds justifying the termination exist, proceedings pursuant to the UD Acts would be likely to follow which, if successful, could result in the employee being (i) re-instated, (ii) reengaged, or (iii) compensated up to a maximum of 2 years' remuneration.

Q. Are employees entitled to redundancy if/when they are dismissed at the end of the contract?

A fixed-term employee with two years’ service may be entitled to a redundancy payment on the expiry and non-renewal of his/her fixed-term contract if the circumstances giving rise to the expiry of the contract fall within the meaning of a genuine redundancy situation under the Redundancy Payments Acts.

However, just because a fixed-term contract is not renewed does not of itself mean that a redundancy has occurred. As always, it depends on the facts and circumstances of the employment and A&L Goodbody is happy to assist with any advice you may require.